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Whistleblowing in Bribery Cases - OECD Reports on Failings in the Public and Private Sector

On 16 March 2016 the Organisation for Economic Development and Cooperation (“OECD”) published a comprehensive review of the arrangements in place across all OECD countries for protecting whistleblowers that raise concerns (the “Review”). Particular attention has been given to the adequacy of protections in both the public and private sector for those who report instances of foreign bribery. It is reported that at least 27 parties to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “OECD Convention”) do not provide effective protection to whistleblowers in this area. There are 34 member countries to the OECD Convention including the UK, US, France, Germany, Switzerland and Poland. This Alert identifies the key issues for businesses and the likely effects of the Review on the future flow of whistleblowing reports.

Weil has significant global experience of advising companies, private equity firms and funds, engaging through boards of directors, audit and special committees, on issues such as whistleblowing and wider compliance matters.

Our global team regularly works with clients to analyse and review their existing policies and standards, working together to collaboratively develop and implement more robust systems and procedures.

Context

At the 2011 G20 Summit in Cannes, the G20 Leaders endorsed the G20 Anticorruption Working Group’s recommendation of supporting legislative changes to protect whistleblowers. This commitment has led to the rapid development of legislation – with more legislation in this field in the past five years than in the previous 25 years combined – and the consequential cascading of corporate policies and procedures in this field.

The policy shift at an international level has driven changes in accepted best practice, which has in turn led to corporates adopting policies and procedures for supporting and receiving whistleblowing complaints. Many corporates who are already struggling to handle the volume of complaints are likely to see a considerable increase over the short- to medium-term.

OECD Findings

Fragmentation of laws

Whilst many countries have implemented some form of protection for whistleblowers, in most instances the laws are dislocated and difficult to access. Eight out of the 34 OECD countries (Hungary, Ireland, Japan, Korea, New Zealand, Slovak Republic, South Africa and the UK) have implemented dedicated whistleblower protection laws applicable to both the public and private sector.

Inconsistencies in protections

Whilst countries with whistleblowing laws generally contain the main components of a protection system, there are important differences in scope; i.e., the type of wrongdoing covered, the class of persons to whom protection extends, options for anonymity / confidentiality and remedies for victims of retaliation.

An ad hoc approach

The majority of OECD countries enact protection provisions on an ad hoc basis through piecemeal provisions in laws reacting to events. This is viewed as imperfect and ripe for reform.

Incentive Schemes

Eight OECD territories provide some kind of incentive scheme for whistleblowers. These range from direct and substantial financial reward schemes (the US and Korea) to other reward systems, such as in Israel where the President may award certificates of merit to public servants for reporting corruption or unethical conduct. The OECD study questions if such schemes should be more widely adopted.

Anonymity / Confidentiality

Inconsistencies exist in the approach across countries regarding guaranteed anonymity for whistleblowers. For example, in the public sector, 59% of OECD countries guarantee complete anonymity to workers and almost all territories offer confidentiality; in the private sector, 53% of companies surveyed reported providing anonymity and 38% provided confidentiality. The OECD study – and the market more broadly – questions the practicality of maintaining anonymity when investigating complaints.

Scope of Protected Persons

There are wide variations as to who is protected under local laws and what can be claimed by way of compensation for retaliation.

Awareness raising

Only half of OECD countries publically promote whistleblowing. The Review notes that there is still some stigma around reporting misconduct and that much more should be done to eliminate this.

Private sector protection

The OECD identified a number of local laws as either non-existent or ineffective in its ability to protect private sector whistleblowers. The UK, Japan, Korea, New Zealand and South Africa are highlighted as having good practice; however, the overall conclusion is that 27 of the 41 parties to the Anti-Bribery convention have unsatisfactory protections.

OECD Recommendations

As a result of the gaps and inconsistencies identified in the legislative framework of members of the OECD and countries party to the OECD Working Group on Bribery, the Review recommends a priority review of these countries’ laws.

Ensure that whistleblower protection laws apply to all persons who carry out functions related to an organisation, i.e., current employees, temporary employees, former employees, foreign or expatriate employees, consultants, suppliers, and other third parties.

Encourage countries and corporates to raise public awareness through communication and training on the importance of whistleblowing.

Encourage countries to develop systems to identify data, benchmarks and indicators in relation to the performance of whistleblowing programmes.

What this means

The OECD Foreign Bribery Report (2014) analysed 427 concluded cases for bribery of foreign officials since the commencement of the OECD Convention; of these cases, 31% were brought to the attention of law enforcement by companies self-reporting and only 2% by a whistleblower. However, 17% of these self- reporting companies became aware of foreign bribery in their business operations due to a whistleblower.

How do self-reporting companies become aware of foreign bribery in their business operations?

The UK and US are broadly well-placed in terms of their framework of whistleblowing legislation and we do not expect the Review to offer major recommendations for change. This is in direct contrast to expectations for other countries, where we consider it likely that the Review will drive a process of legislative and cultural change that will support whistleblowing in both the public and private sector:

More countries will be required to implement comprehensive legal frameworks to protect whistleblowers in the public and private sectors;

The categories of protected persons will increase dramatically;

There will be public awareness campaigns in all OECD countries encouraging whistleblowers; and

Rewards systems (financial and non-financial) will become more widespread.

These measures are likely to drive an increase in the number of whistleblowing reports, particularly for corporates who operate in jurisdictions that will be required to upgrade their legal systems to modern standards. Corporates will therefore need to start planning for the expected growth in reports of alleged misconduct, including putting in place robust and well- resourced systems and procedures that are capable of collecting and analysing data to demonstrate performance against a benchmark.